The best rates on CDs and savings accounts right now, and why the Fed’s rate hike could push them even higher

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It’s a great time to start saving money – especially if you keep it in the right place.

The Federal Reserve just raised its target range for interest rates to 3.00%-3.25%, the highest in more than a decade. That means better interest rates on the best high-yield savings accounts and the best CDs.

These account rates are related—but not directly linked—to federal interest rates set by the Federal Reserve. This year, the Fed has made a series of rate hikes to reverse runaway inflation rates. And given the recent rate hike, experts expect interest will only go higher.

“At the next meeting, rates are definitely going to go higher,” Chris Chen, a board-certified financial planner at Insight Financial Strategists in Newton, MA, told us ahead of this week’s announcement. In fact, the Fed raised rates by 75 basis points in its fifth rate hike this year. “The question is, will it be enough to tame inflation?”

Higher interest rates mean more expensive debt, from mortgage interest to credit card interest. But for savers, higher interest rates can put a few extra bucks in your pocket thanks to the income on your savings accounts.

Here’s a look at this week’s best savings and CD rates, and what experts have predicted for the interest rate moves to come:

How NextAdvisor analyzes CD and savings rates

In our average CD and savings rate analysis, we compare three different averages. First, we review the national deposit rates from the Federal Deposit Insurance Company (FDIC) and Bankrate’s national deposit account index, based on a weekly survey (like NextAdvisor, Bankrate is owned by Red Ventures). We also calculate the current average exchange rate for each bank on our list of best cd prices and best savings rates — On these pages you will learn more about how we select the banks included in our lists.

The differences between the national average savings rates and NextAdvisor’s interest rate analysis are largely due to the much higher APYs that online banks pay.

National FDIC and Bankrate surveys cover many different types of financial institutions, including large national banks that charge as little as 0.01% APY. Our lists, on the other hand, consist of Online or hybrid banks with lower overheads, allowing them to pass savings on to customers in the form of interest.

The best CD prices at the moment

Average CD prices are up quite significantly this week. Based on Bankrate’s weekly survey, average CD rates for one-year maturities rose 0.11%, while three- and five-year maturities rose 0.08%. Among the rates we track at NextAdvisor, 1-year CD averages 2.77%, 3-year CDs average 2.96%, and 5-year CDs average 3.24%.

But experts warn against falling for the higher rates of long-term CDs today. “Don’t hold on to CDs for more than two years,” says Joanne Burke, board-certified financial planner and founder of Birth Street Financial Advisors. Even if you’re building a CD ladder that can help you keep up with increasing rates more than a single CD, two-year maturities should be the longest, she says.

Here are some of this week’s top CD deals, by term:

1 year

  • CFG Bank: 3.05% APY
  • Bread Savings: 3.00% APY
  • Sallie Mae: 2.85% APY

3 years

  • Bread Savings: 3.55% APY
  • CFG Bank: 3.50% APY
  • Sallie Mae: 3.15% APR

5 years

  • Bread Savings: 3.65% APY
  • CFG Bank: 3.60% APY
  • Sync Bank: 3.50% APY

The best savings courses at the moment

Interest rates on savings accounts moved a little slower this week. National index averages were flat, but the average high yield savings rates we track at NextAdvisor increased slightly from 2.00% APY to an average of 2.03% APY.

Ahead of the next Fed rate hike, now is a good time to open a competitive high-yield savings account with a floating rate that will rise in tandem with federal rates. Here are this week’s best interest rates:

  • UFB Direct: 2.61% APY
  • Prime Alliance Bank: 2.26% APY
  • TAB Bank: 2.16% APY
  • Lending Club Bank: 2.15% APY
  • Bread saving: 2.15%

What you should know when prices rise

Interest rates are rising as part of the Fed’s plan to bring down the runaway inflation rates we’ve seen this year. And experts say we still have a long way to go before inflation catches up.

In the short term, Chen said, inflation could cause many Americans “massive pain” when it comes to prices.

“This is going to be a pain for consumers,” says Shannon Gray, board-certified financial planner and founder of InvestEdge Planning, a financial planning firm in San Diego, California. It forecasts another hike of 75 basis points, which would raise rates by the same margin as the last rate hike in July. Although “they could go even higher if they want to be really aggressive,” Gray says.

Should You Open a CD or High Yield Savings Account Now?

The pundits we spoke to currently agree with their advice to savers: don’t lock up your money in a long-term CD account; maintain liquidity.

“The problem and the advantage of CDs is that you fix the rate,” says Chen. “If you don’t need the money in the next five years, please don’t put it in a CD at 3.25% when you have an 8% inflation rate. Go for the high return instead [savings] accounts.”

Based on this week’s interest rates, you can earn well over 2% APY on high-yield savings accounts, “which is well below inflation but better than zero,” says Chen.

High-yield savings accounts offer more liquidity and flexibility in a pinch, and their variable rates can help you continue to benefit from rising savings rates.

“If the Fed changes their language on how to fight inflation, then we’re talking a little more about going into the interim period [CD] Runtimes and the longer runtimes,” Gray says. “[Until then] Structure yourself so that you have real flexibility if those interest rates continue to rise because that gives you the opportunity to lock in higher rates.”

CD and Savings Rate FAQs

What is the best CD rate?

You can now find CD rates over 3% APY even for 1 year terms. Remember that as interest rates continue to rise, it is best to stick to shorter-dated CDs.

What is the best savings rate?

The best savings account rates are around 2.15% to 2.20% APY, although some banks offer even more. As the Fed continues to hike rates, variable APYs on high-yield savings accounts are likely to rise.

How Long Will CD and Savings Rates Rise?

As long as the Fed continues to raise interest rates, experts predict that interest rates on CDs and savings accounts will also rise.

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